Mt. Gox, the embattled Bitcoin exchange, has filed for bankruptcy protection after falling into a state of disarray earlier this month in the wake of a security lapse that led to fraudulent withdrawals.

The exchange's CEO, Mark Karpeles, announced the news in Tokyo on Friday, saying that Mt. Gox lost nearly 750,000 customer bitcoins, as well as 100,000 of the exchange's own bitcoins. The total number of lost bitcoins translates to nearly $500 million at the current exchange rate, the Wall Street Journal reported Friday.

At the Tokyo press conference, Karpeles expressed contrition about Mt. Gox's crash, and sought to separate that development from the larger Bitcoin movement. "First of all, I'm very sorry," he said, according to Reuters. "The bitcoin industry is healthy and it is growing. It will continue, and reducing the impact is the most important point."

The massive loss of bitcoins had been rumored all week. Due to the currency's encryption technology, it might be difficult, if not impossible, for the stolen bitcoins to be restored to their owners' accounts, leaving people across the globe with significant losses.

At its height, Mt. Gox was one of the most popular Bitcoin exchanges. It was often cited in news stories discussing the startling rise of the Bitcoin phenomenon, which at one time, flirted with a bitcoin value of $1,000.

Mt. Gox's Karpeles acknowledged that the bitcoins were stolen through a weakness in his company's system that allowed hackers to slowly withdraw the currency.

According to Karpeles' lawyer, Mt. Gox has $63.6 million in debt, and about half that in assets. Even with the filing for bankruptcy protection, Karpeles would like to see Mt. Gox live on and come back, though it's not clear whether that will happen or whether customers would come back and use the exchange. In the meantime, Mt. Gox has been shuttered.

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Don Reisinger is a technology columnist who has covered everything from HDTVs to computers to Flowbee Haircut Systems. Besides his work with CNET, Don's work has been featured in a variety of other publications including PC World and a host of Ziff-Davis publications.
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